BRICS is rapidly growing, expanding from the original nations that help form its name of Brazil, Russia, India, China, and South Africa to encompass 10 countries, adding Egypt, Ethiopia, Iran, Saudi Arabia and United Arab Emirates to its roster. Numerous others are hoping to make their way through the approval process soon.
However, despite its growth, it hasn’t really accomplished much, and at this year’s summit in Kazan on the Volga River, Russian President Vladimir Putin is hoping to convince members to create a new global financial payment system that will threaten the U.S.’s current global finance dominance while protecting members from sanctions.
This is something that they say will enable “economic operations without being dependent on those that decided to weaponise the dollar and the euro.”
Known as BRICS-Bridge, the idea is to build it up within a year and give countries the ability to carry out cross-border payments with digital platforms that their respective central banks run. With the potential for quicker and more affordable transactions, emerging economies could be tempted away from carrying out business in U.S. dollars, and Western officials are already worried about its ability to hep countries get around sanctions.
Put simply, this initiative would use digital money that is backed by fiat currencies, which would mean that central banks are at the center of cross-border transactions. As a result, no single country would be able to cut off another one, and the need for correspondent banks that use the dollar clearing system would be eliminated.
Relying on blockchain, digital currencies and tokens, it has been promoted in Russia as a good alternative to the secure messaging system that handles trillions of dollars each year in global bank payments.
Putin said: “We are not rejecting or fighting the dollar. But if we are not given the chance to use it, what can we do? We are then forced to look for alternatives.”
After Russia invaded Ukraine in 2022, it found itself on the receiving end of numerous financial sanctions, and it’s something that other BRICS members, especially China, are worried about. An alternative system like this one would be highly appealing to the bloc, but experts believe that it could be challenging to get all members to agree on some of the finer points of such a system.
In fact, some are interpreting the fact that the finance ministers of several prominent BRICS nations, including India, South Africa and China, skipped a meeting of BRICS finance ministers earlier this month as a sign that there may not be as much interest in these proposals as Putin hopes.
Proposal is being taken seriously outside of BRICS
However, the proposal by Russia is something that the central bank officials at World Bank and IMF who recently met in Washington, D.C. are taking very seriously, worrying about the global payments system becoming fragmented in the future as a result of geopolitical tensions.
One senior western central bank official said: “You already see Russia and China looking for ways to do more payments between each other that completely avoid the dollar. So we need to speed up the work we are doing to improve cross-border payments.”
Since the war with Ukraine began, Russia has shifted from using non-western currencies for 20 percent of its transactions to around 80 percent.
Sources for this article include:
FreeWestMedia.com
FT.com
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